Fibre on demand could cost $50k, claims Albo

news Communications Minister Anthony Albanese has controversially claimed that the Coalition’s fibre on demand service could cost end customers as much as $50,000, as the debate escalates about which major side of politics is presenting a more accurate picture of National Broadband Network finances going into the Federal Election.

Under Labor’s NBN policy, some 93 percent of Australian premises will receive fibre directly to the premise, delivering maximum download speeds of up to 1Gbps. The remainder of the population will be served by a combination of satellite and wireless broadband, delivering speeds of up to 25Mbps.

The Coalition’s policy will see fibre to the premises deployed to a significantly lesser proportion of the population — 22 percent — with 71 percent covered by fibre to the node technology, where fibre is extended to neighbourhood ‘nodes’ and the remainder of the distance to premises covered by Telstra’s existing copper network. The Coalition’s policy will also continue to use the HFC cable network operated by Telstra and will also target the remaining 7 percent of premises with satellite and wireless.

According to the Coalition’s media release issued in April upon the policy’s launch, the Coalition’s policy is based on the core pledge that the group will deliver download speeds of between 25Mbps and 100Mbps by the end of 2016 — effectively the end of its first term in power — and 50Mbps to 100Mbps by the end of 2019, effectively the end of its second term. According to the Coalition’s statement, the 25Mbps to 100Mbps pledge applies to “all premises”, while the higher pledge by 2019 applies to “90 percent of fixed line users”.

On additional feature of the Coalition’s policy will see users offered a so-called ‘fibre on demand’ extension services where they will be able to pay to have fibre extended from their local node to their premises.

The Coalition believes it will be possible to offer this kind of service on a similar basis as it is offered in the UK, where wholesale telco BT Openreach is offering so-called ‘fibre on demand’ extension services at a price depending on how far premises are from their nearby node. According to OpenReach’s price list, costs for the fibre extension service include a £500 (AU$823) initial connection fee and ‘annual rental’ cost of £465 (AU$765), plus a specific charge ranging from £200 (AU$329) up to £3,500 (AU$5,762), depending on the distance premises are from local nodes. Shadow Communications Minister Malcolm Turnbull has stated he believes the service will be available for up to several thousand dollars in Australia.

However, an article published in The Australian newspaper yesterday (paywalled) claimed the real figure could be up to $50,000, based on current contractor rates involving extensions of Telstra’s network. In a media release issued yesterday, Albanese appeared to take The Australian’s calculations as gospel.

“Contractors in the Australian today have confirmed that families and businesses will be slugged as much as $50,000 if they want to connect to superfast fibre broadband if Tony Abbott wins the election,” stated Albanese.

“Under the Coalition’s second rate plan, fibre optic cable will be run to a fridge-sized cabinet plonked on everyone’s street corner. Last century’s copper wire is here to stay, with those wanting to connect their home or business to the latest fibre technology having to pay as much as $50,000 out of their own pockets, plus an ongoing rental fee of $800 a year.”

“Given these extraordinary costs, it’s no wonder that businesses and farmers are amongst the latest to give their backing to Federal Labor’s NBN, which connects fibre all the way to their premises for free.”

“The Rudd Labor Government believes that high-speed, affordable and reliable broadband is an essential utility – like water and electricity. It shouldn’t depend on where you happen to live or how much money you have. If you want the National Broadband Network, you have to vote Labor.
Whether it be cutting the Schoolkids bonus, cutting superannuation contributions, or charging families as much as $50,000 to connect to superfast fibre broadband, if Tony Abbott wins, Australian families, businesses, and farmers will lose.”

In a separate release, Turnbull stated that The Australian’s article contained “a number of inaccuracies and misleading statements”.

“The article states that the cost of obtaining access to Telstra’s duct network is $5 per metre – stating that this could cost homeowners more than $2500 to connect to fibre,” wrote Turnbull. “However, the NBN Co has already paid billions of dollars to acquire access to Telstra pits and ducts.”

“It also states that terminating fibre in a household can cost up to $4000. Yet the article is entirely uncritical of Labor’s claim on April 19 that the customer connect portion of the network is costing $1,100 per household.”

“Above all, it is wrongheaded to assert that a particular home-owner would bear the end-to-end costs of a fibre-on-demand deployment from a node to their premises. If The Australian ever bothered to interview anyone at BT Openreach, which it quotes in its story, it would have reported that the costs take into account the deployment of shared network infrastructure.”

“That is, once a single household requests a fibre on demand product, it becomes cheaper to provision fibre to anyone else in the street whose premises have been passed to order a service at a later date, and that is reflected in the deployment charges.”

“But most baffling are the contradictions in the article. If it is going to cost up to $50,000 to connect some houses via FTTP, how will the NBN be able to avoid those costs? And if not, how can they possibly say that the average cost to connect a household in Australia will be $2,400? And if it is going to cost up to $50,000 for some houses to get FTTP, isn’t it worth trying to avoid that very high cost if you can get those customers a service level that will satisfy their needs the foreseeable future?”

The news comes as both major sides of politics have been engaged in an election debate involving claim and counter-claim regarding the NBN, in which the truth has often been a casualty of war. Labor’s primary contention is that the Coalition’s NBN policy relies on outdated technology, regarding the use of copper cable in its FTTN strategy, although FTTN networks are used in most first-world countries successfully. The Coalition, for its part, has refused to fully cost its own NBN policy, but has controversially claimed that Labor’s NBN project could cost up to $50 billion more than Labor expects. Based on NBN Co’s current projections, the claim is not based in fact.

opinion/analysis
I don’t have the time this morning to go into detailed analysis of this situation, but let me say this: I don’t believe the claim that the Coalition’s fibre on demand service will cost $50,000 a pop has any basis in reality. The UK experience clearly shows the costs will be dramatically less, and Turnbull is right that most of the costs will be absorbed by NBN Co in any case. Sure, the UK is different from Australia in terms of its population density, but it’s not different to the extent that FTTP extension costs will be ten times higher. With this claim, as with many of his recent claims, Anthony Albanese is on shaky ground.

I’m a bit undecided on this, but I don’t know if the claim is as ‘shaky’ as it might seem at first glance.

At a previous place of employ, we were asked to quote on a fibre run that covered approximately 400 metres, that would have crossed under two streets through existing ducts, and through a short new duct from the kerb into an educational institution, in Melbourne’s inner-north.

The quote? $80,000. From a major carrier. Not Telstra.

Now, while I wouldn’t expect such high costs under an NBN Co geared up to do this sort of work semi-regularly – (I wouldn’t expect the project management costs, and work permitting costs involved in the quote we sought to be necessary for an NBN Co fibre run) – it honestly doesn’t sound completely out of the realms of possibility to me.

In reality, even if it were $25,000 – it won’t actually ‘cost’ anyone that much, because very few people will be able to come up with a business case to justify spending that much on a fibre build, so it mostly just won’t happen.

Needless to say, the customer laughed and politely said ‘no thanks’ when we had quote them $80,000. We hadn’t even put any margin on the price from the carrier in question – we decided to pass it on at cost price to us, because standard margins on top would have pushed it to around $100,000.

Again, I doubt $50,000 would happen very often in practice – (if at all) – but it could happen in some instances.

Pretty much summed it up for me. There are cases where the cost can be $50k (or more), but its unlikely that the end user will be willing to pay that much.

Its semantics on whether that makes the statement false or not. I dont think it does, because the cost could be $50k, rather than the outlay… Its not a fair statement though because its not likely to affect many people if any, but its not false. Its the same as The Turnbull saying FttN can cost “up to” $94b – its an implication, not an expectation.

You can’t compare it to bespoke projects since a rollout has economies of scale. Since car analogies are so popular with the NBN, the equivalent here would be ordering a custom car from a drag racing outfit versus a Holden from a production line.

Nik, I disagree. Under a FTTN model, fibre installs will be bespoke projects all on their own and you best believe that any commercial monopoly worth their salt will treat it as such and bill accordingly.

Best bespoke case I had when helping a wholesaler was ~$100 per M deployed in existing ducts (from memory a 300M run). Assuming an 800M run from a node to a house, you are talking $80K right there, $40K for 400M – so it is not so unrealistic – even halving it for economy of scales it is still a pretty ugly number. That doesn’t take into account the run from the duct to the house which will need to be trenched as a pull through using existing copper might not work.

This is worst case but in a competitive environment such as the Lib NBN, there will be a lot of pressure on the providers not to absorb this cost and spread it over everyone – so it will be the buyer who pays the true cost or the tax payer who pays it if hidden.

The exact point I believe.
FTTP under the Labor plan is a roll-out and delivering connection for as little as $2300 as documented in the April report to the Senate committee.

FTTP under the coalition plan is NOT a roll-out, it is a one off extension for one customer who must wear the entire cost of the exercise at commercial works rates in-line with the coalition policy, a recent article in the SMH highlighting a case where the quote was almost $6000 for a 15m lead-in.

There are a lot more worst case scenarios under a fiber on demand rollout than a fiber by design rollout.

Not sure thats going to mean any residential rollout would pay something like this, but if you scale the problem back it gets back to $5000 to get connected as a possible number for the same reason, and thats getting into the area people might pay.

If I was selling my property, and $5000 meant I could connect FttH, and hence add a further $10,000 to the property value, its worth considering. Outside of that, its a much tougher choice.

“Not sure thats going to mean any residential rollout would pay something like this, but if you scale the problem back it gets back to $5000 to get connected as a possible number for the same reason, and thats getting into the area people might pay.”

That’s why I believe the $5000 is not that far off for an average cost.

If you happen to be close to the node, the imperative for a fibre extension is far less because you already have reasonable speeds and the cost of the extension will be very high relative to the improvement in service.
If you are at the limits of the node, $20,000 would not be an unlikely quote and just as unlikely to be taken up and yes, the odd $50,000 quote is likely.

If you are somewhere in the middle then the speed gains of fibre will be significant and the costs high, but within the limits of possibility, somewhere below what people were prepared to pay for a new a new plasma tv for instance when they first hit the market.

Actually this is a good model for the pricing to. Make one plasma tv and it will cost 10’s of thousands, make thousands of them and the price falls.
Connect one customer to FTTP and they have to wear all the costs, connect thousands and much of that one off cost is shared.

Don’t forget that companies are looking at wearing that cost if people sign up for long contracts (Optus specifically, but I’m sure others would also be considering it). No doubt they would have an upper limit too, but it basically make FoD a lot more realistic.

Perhaps Telstra will eat a 5000 dollar charge on a 3 year contract, but their monthly prices will need to be significantly marked up.

If their margin on the internet plan is $100 per month, that still leaves $1500 unaccounted for, and zero profit for the telco having you on their books.

Other than Telstra and Optus; I am not aware of many residential (or small business) Telcos with margins that could go any significant way to diminishing the 5000+ dollar charge that going FoD will incur.

They plan a minimum speed of 25 megabits, using vdsl2 which roughly equates to 1.5km.
I realise the openreach pricing page offers longer distance FoD, but I don’t want to misrepresent the coalition plan unfairly.
So I am estimating pricing based off the characteristics of the network as defined by the coalition plan. Malcolm has also in passing (from memory – I would love to be corrected if he never said this, or said something different) that he expects the average distance from a node will be around 500 meters. Though, this isn’t formally specified in his document.
(500 meter average does pass a basic sniff test though if a maximum run is 1.5 km – they won’t be *aiming* for 1.5km max, but the odd outlier will end up here is the way I read it).

I personally don’t think they will be able to promise a run of less than 1.5 km to everyone on FTTN, but that is what it is and (at some point) we have to take them at their word. I am just trying to take their numbers and provide actual examples of the cost.

The main reason I am persisting with these figures is that they love to dispute the 5000 FoD claim, by pointing at openreach pricing, but I actually think the $5000 claim is quite accurate.

Michael Wyles has a good example above, my own personal example at work was a fibre run of about 150 meters through mainly Telstra pits (from a non-Telstra telco).

Quote came out to 20k up front, and 30k ongoing for a 3 year term. They *really* tried hard to get us a good price.

For the 3 seperate fibre runs into our buildings at work, where the run was approx 30 meters (pit outside to basement), each install cost 10k. Keep in mind; that 20 meters of each of those was effectively hanging a fibre on a tray through the carpark, only ~10 meters was cutting footpaths.

What happens then? I can picture some properties here in Wollongong that are going to have pretty long lines run from the curb to the premise that might fall into that category, and those lines are going to cost NBNCo a pretty penny to install. Some of these places are hundreds of meters from the road.

So in a 100% FttH area, what are their options going to be? They wont have FttN available, and neither fixed wireless or satellite will be an option.

If a property is not fit to receive their guaranteed 25Mbps via FTTN and replacement of copper or laying of fiber is too expensive, why is satellite not a possibility?I would have thought it would still have been open as an option of last resort in FTTN serviced area.

As I understand it, satellite companies wont connect to properties in urban areas. If you’re in an area with a FttN or FttH footprint you should be using those services, not satellite. Could be wrong, thats just my understanding, and why I tossed it in there.

I’m looking at a specific situation where an area is FttH (not FttN) and the last mile run of fibre to the premise is prohibitively expensive. As the area is FttH, what happens? On the outskirts of most urban areas, there are isolated properties where this happens.

Can you imagine the stories if they ran fiber to the premise, at a cost of $50,000 for the one property? Whoever’s in opposition would have a field day…

My understanding is that NBNCo *won’t* be installing fibre for you if your driveway (effectively) is that long. The limit’s 40m or some such. After all, FTTP is what they’re deploying in *urban* areas. If you’re really 200m away from the road, it’s a good bet you’re not in the footprint. If you are, well, you won’t be once they find out. Fixed wireless it will be.

40m covers 98% of all urban premises. There are outliers in any large scale rollout. It’s disingenuous to suggest any more than a few thousand premises in total will be affected by this out of the millions being covered.

Also, it’s 40m from the PCD. The PCD is on the side of the house. There is no limit I’m aware of to lead in fibre length. Happy to be corrected.

Actually what I find amazing is that 90% of the network design is publicly available.

I find it very hard to stomach when people start spouting “NBNCo. aren’t being transparent”. Sure, there are things they can’t disclose and politics has made things they want to, but are asked to sit on. But NBNCo. are more transparent than 99.9% of companies in Australia right now.

With regards to the copper, Coughlan says, Telstra may first look at leasing the copper to NBN Co however, if a purchase is envisioned, then a price equivalent to 80 per cent of the saving associated with doing fibre to the node (FTTN) vs Fibre to the premises (FTTP) would probably be the telco’s opening gambit.

‘ But NBNCo. are more transparent than 99.9% of companies in Australia right now.

I have to agree with you on that, the level of detail in the NBN Co Business plans is very good, and some of the statements are surprisingly quite candid, especially with regard to areas like identifying future risk to the ROI.

Unfortunately detail is a two edged sword, the more detail you give means any criticism of missed targets etc is very effective as the Business plan provides the baseline ammunition, you only have to compare figures in the Business plan/s to the announced actual figures, and if this has been done multiple times as it has it diminishes confidence in the Business plan if targets are missed.

I am sure the Coalition if they win will find some extra meat in their post election analysis of the Labor NBN rollout that justifies their own policy, especially if the latest Business plan contains any bad news.

you only have to compare figures in the Business plan/s to the announced actual figures, and if this has been done multiple times as it has it diminishes confidence in the Business plan if targets are missed.

That’s you opinion. I and many others can see that the business plan, since the original revision to take into account a delayed start not within NBNCo’s control, is only 0.5% behind in projections across the whole plan. That is why I don’t understand people getting so uptight about 100 000 connections- it’s chicken feed on the 12 million yet to be connected. The day the run rate starts going backwards regularly I will have doubts about the rollout. Until then, as far as I’m concerned, this is nothing more than a run of the mill hiccup in a project this large.

I have to agree with you on that, the level of detail in the NBN Co Business plans is very good, and some of the statements are surprisingly quite candid, especially with regard to areas like identifying future risk to the ROI.

Yeah, me too. In a lot of ways, NBN Co have been their own “fifth columnist” in being the party to actually provide all the ammunition to bring them down. Or you could look at it as they have provided accountability and transparency. Depends on your point of view I guess…

What can you expect when the debate on a national network is left up to politicians? Where is the input from technicians and scientists? Even telco execs?

Their input is everywhere – but the mainstream media, which is where 99% of voters get their information on it – don’t report it on that level. They probably can’t, as those 99% of people would just glaze over at that level of detail.

But they can report it far more honestly, even without the fastidious detail. But they don’t.

I think we need to be more clear in making the distinction between business grade multicore PtP fibre, and residential grade PON based single core fibre. 50k for business grade would be perfectly normal.

they have no difficulty with that one as it is so hyperbolic they conclude no harm in running it.

if, as M.Wyres says, reporting was more honest even without fastidious detail – they might baulk at it but i think in this instance they probably feel theyve thrown enough shit at the wall, a little more wont make any matter.

if it is in any way indicative of change in editorial slant at the oz consider me stunned….im not believing that one without more proof tho.

Having witnessed the bill from plumbing fibre into many buildings, $50k is pretty average, even LOW for a business, that being said, economy of scale and all that plus it depends on how far the fibre needs to be dragged and how much dirt & asphalt has to be dug up

“The article states that the cost of obtaining access to Telstra’s duct network is $5 per metre – stating that this could cost homeowners more than $2500 to connect to fibre,” wrote Turnbull. “However, the NBN Co has already paid billions of dollars to acquire access to Telstra pits and ducts.”

i have to question this.

yes, there is a deal between nbn co and telstra for access to the pits and ducts, however, does that deal extend to the customer in an FoD situation?

The cost to run the fibre; is a price paid to NBNCo. The customers aren’t running their own fibre, they are merely making it cost effective (ie zero or low cost) to NBNCo to run the fibre.

It would be disingenuous to claim that the pits and ducts would not already be leased.

Unless Turnbull changes the 11billion dollar agreement to no longer cover the “last mile” (in an effort to get a cheaper price for the copper network from Telstra) since they no longer need to lay fibre in there for everyone…

Isn’t it another issue of being the incumbent versus not being the incumbent? I guess, as long as Telstra agree to continue to allow access to the ducts and pits for fibre runs as under the current agreement, while also giving away the copper access network for free on top of that (hmm…), you might be able to do FTTN and FTTP side-by-side without such astronomical prices to consumers.

“But most baffling are the contradictions in the article. If it is going to cost up to $50,000 to connect some houses via FTTP, how will the [Labor] NBN be able to avoid those costs?” (MT)

That’s what I consider the important question. It’s all good and well to say some FoD may cost $50k for some premises, but if comparing apples with apples, how much will the same premises cost to fibre under Labor’s NBN, and where does the revenue come from to cover such expensive builds? Higher than required wholesale costs that filter down to increase end-user pricing for the next 20 years is my guess.

Part of the answer is the cost is averaged across all installs. Another part is because they are doing it as a bulk roll-out, they get a bulk discount. Another part is that private enterprise is willing to pay more, so they get charged more.

It’s all good and well to say some FoD may cost $50k for some premises, but if comparing apples with apples, how much will the same premises cost to fibre under Labor’s NBN, and where does the revenue come from to cover such expensive builds?

well, nbn co has already paid to use the pits and ducts as part of its deal with telstra.

this sort of relates to my earlier post about the nbn co/telstra deal.

does it extend to the end customer in regards to FoD?
if it does, then i can’t see FoD costing anywhere near $50k.
however, if it does not extend to the end customer, then $50k does not seem out of the realm of possibility.

There are a number of factors that make FoD/Fibre Extensions so expensive:

1/ they are inherently inefficient, your workers are building a single extension from point A to point B only and the labour cost is not spread across multiple premises.

2/ Point to Point fibre is all custom install work – it requires expensive fibre splicing equipment and trained techs. there are no pre-made pre-connectorised cables like NBN Co are using for their GPON rollout.

The only fibre splicing done my NBN co is at the FSAM and back deeper into the Fibre network, everything from the FSAM cabinet optical splitters to the premises is all pre-made pre-connectorised cable that only requires patch leads to be pulled from the pit to the PCD on the outside of the premises.

$50,000 would be around 15 Km going on BT’s pricing (seems to average around $3/m on their higher tiers, I’d expect that to hold, but an increase in cost wouldn’t be unexpected for really long runs).

I’ve been trying to wake people up about this for a while now.

Everyone is focused on FoD as a direct replacement of FTTN (so just looking at the 500m-800m pricing), but folks over 800m are the ones that’ll actually have to seriously think about FoD or get stuck on wireless/satellite. I’m not sure what NBN Co’s system can manage, but fibre runs of 20-32Km aren’t that uncommon.

“but folks over 800m are the ones that’ll actually have to seriously think about FoD or get stuck on wireless/satellite. I’m not sure what NBN Co’s system can manage, but fibre runs of 20-32Km aren’t that uncommon.”

Isn’t the satellite and fixed wireless footprint essentially the same for both ALP and Coalition builds? If so these people would be on wireless/satellite with the ALP NBN anyway. They gain nothing from the ALP NBN.

Isn’t the satellite and fixed wireless footprint essentially the same for both ALP and Coalition builds? If so these people would be on wireless/satellite with the ALP NBN anyway. They gain nothing from the ALP NBN.

I’m not thinking of the rural and remote areas (where Malcolm and NBN Co match up on wireless/satellite), I’m thinking more on “edge” cases, where folks are within a few Km’s of a node, but they won’t bother running a node out to cover 1-2 houses just outside of town (but within 20Km). I’d expect those cases to get wirless

Anyone know what the actual criteria/cutoff for getting FTTP or wireless is for the NBN, or does NBN Co just make a judgement call on it? I’d expect it to cover more area than FTTN, as they don’t have to put costly equipment like a node at the end.

I’ve been raising the same oppoint myself recently Tinny. Every urban area has specific situations on their outskirts where someone has a property thats a few acres, and live inside either a FttN or FttH footprint, depending on how lucky they are.

What is going to happen to them? I believe there will be enough of them for it to be an issue, and inevitably these properties arent worth $1.50 so there will be ‘people of influence’ impacted. Its going to be news if they get the shaft.

I get the feeling that there will be more outliers under the FTTN system though, it’s not like they’ll build a node out to service a house just outside of where they’ll be able to get service. With FTTP, they’d just add a few more metres of fibre.

If Turnbull’s plan is to convert a street GPON, then it’s a rubbish claim ….. But MT has not confirmed whether his FoD “paragraph” from his 56 page policy is AON (PtoP Fibre) or GPON (as NBN Co are building).

Here is the thing that I don’t understand about this part of the debate. You end up in an absurd situation where Labor are arguing that the cost of connecting fiber is prohibitively expensive under the coalition plan. But doesn’t it mean that Labor will just be picking up that tab in their plan?

Albo arguing about the fiber connections being so expensive is essentially doing the coalitions job for them.

oh dear, poor old Labor, you can almost see the whites of their eyes showing as the election date looms, forced into a strategy of their own making where they cannot sell their own NBN policy and have decided long ago the best form of attack is to make up Coalition policy for them and hammer negative BS over and over.

The problem is as the negativity meter reaches a countdown to September 7th frenzy the bizarre meter climbs with it.

Just a side comment: Why are these articles only talking about download speeds. I searched the whole page for upload and got zero hits. Comparing upload speeds is where the real battle is at. I certainly wouldn’t care as much about the difference between 25 or 100mbit down as much as the difference between 5 and 40. The 8 times faster upload of FTTH represents a significant increase of performance for anyone wanting to publish digital content. And this is stage 1 too; FTTH uploads could be increased even further than the current plan.

Reliable competition will have a big factor in the quoted prices of ‘last mile’ fibre runs.

Has there been any mention of the competition structure of the Coalition plan?

The 120 POI (Points of Interconnect) of the ALP / NBNCo plan makes it especially capital intensive for small nimble service providers to compete across broad areas. Every part of the connection between the consumer and the Internet (or other content) needs to be considered.

Stephen, there was a good discussion on this topic on here last week, though the title of the article escapes me. Simon Hackett posted a comment raising that point and a number of people demonstrated that the PoI situation isn’t actually as problematic as Mr Hackett (and some others) seems to think.

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